Data Enabling More Personal, Less Promotional Marketing

Among marketers, the 2010s may go down as the golden era of data mining. Never before have marketers had access to so much information about their customers, and this data is enabling a transition to more personal and less promotional marketing.

Whether it’s tracking customers as they cruise websites, monitoring their comments on Facebook, or reviewing purchases registered through loyalty programs, retailers and brands are harnessing data to gain unprecedented insight into customer behavior.

“We know if you’re one of our customers through our catalog or from dot-com,” Cabela’s CEO Tommy Millner told analysts in May. “We know where you live and if you have one of our credit cards. We also know what you spend, not just at Cabela’s, but on other things. So that’s a wonderful modeling tool that allows us to go where the fish are.”

While retailers and brands remain concerned about identity theft, consumers seem willing to volunteer personal information to brands they trust.

In the first quarter of 2012 alone, 350,000 people joined Sport Chalet’s Action Pass loyalty program. REI ended 2011 with 4.7 million active co-op members, up 300,000 from a year earlier. Cabela’s calls the loyalty program it offers through its Cabela’s Club Visa credit card, which is issued by a bank the retailer owns, “the glue that sticks customers to our brand.”

The flood of data has enabled marketers to identify trends based on how individual consumers research, and buy or don’t buy products. It is helping retailers identify and target niches such as backcountry skiers or shoppers who have abandoned an online shopping cart filled with disc golf equipment in the last 30 days. When done correctly, such data can be used to personalize marketing messages in a way that strengthens a brand’s bonds with its customers.

A 2011 survey by the Aberdeen Group shows retailers who personalize online marketing messages see 16 percent increase in retention rates and 15 percent increase in response rates.

Sport Chalet fully analyzes the buying pattern of each of its Action Pass loyalty club members by store and by season, down to how frequently they purchase specialty services like bike tune-ups or SCUBA lessons. This enables the company to understand how each item it sells performs in every store, by size and by color. It also helps it identify cross-selling opportunities, since research by The Outdoor Foundation shows how participants in some so-called “gateway” activities like camping and fishing are more inclined to try other sports. (Outdoor Industry Association® (OIA) is hosting a series of market research seminars at the upcoming Outdoor Retailer Summer Market.)

“We study our customers’ online behavior and how they use our website to learn more about the products and services we offer in our stores, as well as their online purchasing behavior,” reads Sport Chalet’s 2011 annual report. “All of these data collection points help us to understand our business within a diverse marketplace and to make more informed decisions relating to marketing, store assortments, employee staffing and training, and store location planning both on a short-term tactical basis as well as a long-term strategic basis.”

Having a better grasp on what products its customers are likely to buy has enabled Sport Chalet reduce markdowns, advertising and other promotional costs.

In May, Eddie Bauer announced it had outsourced its customer relationship management activities, including its customer database, to Merkle in a bid to transition to a more personal and less promotional marketing model.

“As our multi-channel marketing efforts progress, we were looking for a partner who could help Eddie Bauer integrate data from catalog, email and other offline and digital interactions; and then use advanced analytics to create insights that give us a 360-degree view of our customers’ needs, preferences and values,” said Eddie Bauer Senior Vice President of Marketing, Ecommerce and Creative, Adam Diamond. “We chose Merkle because of the team’s deep expertise in the specialty retail sector, and their ability to support Eddie Bauer’s move from a campaign-oriented model to one that is customer-centric in its approach.”

Will big box retailers’ embracement of advanced data analytics put smaller retailers at a disadvantage? Three independent outdoor specialty retailers OIA contacted for this story don’t seem to think so. All three said the smaller size and less complex nature of their operations means they can sense the trends that are most meaningful to them with tools in their POS system, Google Analytics, their email vendor or through inexpensive online services they can use to automate and monitor social media feeds.

“You can spend so much time on analytics and not get anywhere with it,” notes John Hutchinson, president of Fontana Sports of Madison, Wis. “It often gets really confusing and it’s easy to lose track of the forest from the trees. Besides, data analytics only helps with what we do sell, but not with what we don’t sell, such as stand-up paddleboards.”

For that Fontana takes advantage of free access to OIA VantagePoint he enjoys as an OIA member. Specifically designed for the outdoor industry, OIA VantagePoint tracks sales of outdoor products at more than 10,000 retail stores in seven channels, including online. (OIA VantagePoint Monthly Trend Report for June 2012.) Brands and retailers use the tool to spot and document trends early and gauge the potential market for new products or category launches.

“When it comes to analytics, the information we get from OIA is probably the most valuable,” said Hutchison. “Because its shows us what trends are building in the larger market place that we could not see otherwise.”